Must a funeral livery service collect New York's 5% special passenger car rental tax, in addition to ordinary sales tax, on its car-and-driver charges to funeral homes?

Plain-English summary

David Dufresne runs an automotive livery service that provides cars and drivers to funeral homes in the Capital District, contracted funeral-by-funeral, to transport the deceased, family members, or others as part of a funeral. He's been charging both ordinary state and local sales tax and New York's additional 5% special tax on short-term passenger car rentals (under Tax Law § 1160) on these charges, and asked the Department to confirm he's doing it correctly.

An arrangement where a business provides a vehicle and driver to a customer counts as a taxable rental of tangible personal property when the customer -- here, the funeral director -- actually directs and controls how the vehicle is used, such as setting the funeral procession's route and itinerary. Because that's exactly the arrangement Dufresne described, his charges to funeral homes are ordinary taxable rental receipts under New York's general sales tax. On top of that, New York imposes an extra 5% tax specifically on short-term rentals (under a year) of "passenger cars" -- vehicles with a gross weight of 9,000 pounds or less and a seating capacity of nine or fewer, designed for passenger transportation. Since Dufresne's vehicles that are used to transport family members and other funeral participants meet that definition, the 5% special tax applies to those rentals too. But a hearse doesn't count as a "passenger car" under this definition, because it isn't designed for passenger transportation -- so rentals of a hearse escape the special 5% tax (though ordinary sales tax on the rental still applies).

What this means for you

Funeral livery, limousine, and similar car-and-driver services

Whether your driver-included vehicle rental is taxable turns on who actually directs and controls the vehicle's route and use -- if your customer (like a funeral director) sets the itinerary, that's a taxable rental of tangible personal property, and if the vehicle is a passenger car (not a hearse or similar non-passenger vehicle), the additional 5% special short-term rental tax applies on top of ordinary sales tax.

Funeral homes contracting for livery services

Expect both ordinary sales tax and the extra 5% special tax to apply to your passenger-car livery charges, but hearse rentals should only carry ordinary sales tax, not the additional 5% tax.

Accountants and tax professionals

This is a clean, narrow application of Tax Law § 1160's passenger-car definition to a funeral livery fact pattern -- useful precedent for distinguishing which vehicles in a livery fleet (passenger cars versus hearses or other non-passenger vehicles) trigger the additional special tax.

Common questions

Q: Does a car-and-driver rental for a funeral trigger New York's special 5% passenger car rental tax?
A: Yes, if the vehicle is a passenger car (9,000 lbs. or less, nine or fewer seats, designed for passenger transportation) and the customer directs and controls its use -- both apply to typical funeral livery cars carrying family members.

Q: Is a hearse subject to the same 5% special tax?
A: No -- a hearse isn't designed for passenger transportation, so it doesn't meet the "passenger car" definition, though ordinary sales tax on the rental still applies.

Q: What makes a driver-included vehicle arrangement a taxable "rental" instead of just a service?
A: Whether the customer (not the vehicle owner) directs and controls the vehicle's use, such as setting the route or itinerary -- if so, it's a rental of tangible personal property subject to sales tax.

Q: Does this ruling apply to my livery or limousine business?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own contracts and vehicle types would need their own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_65s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(65)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970806B

On August 6, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from David E. Dufresne, S Dufresne Livery, Inc.,
216 Columbia Street, Cohoes, NY 12047.
The issue raised by Petitioner, David E. Dufresne, is whether he is
correctly collecting the 5% special tax on passenger car rentals, imposed by
Section 1160 of the Tax Law, on receipts from the sale of his automotive vehicle
livery service.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner’s business provides automotive vehicle livery services to
funeral homes in the Capital District area. The services are contracted for on
a funeral by funeral basis.
Petitioner provides a car and a driver to the
requesting funeral home for the purpose of transporting the deceased, family
members, or other people as part of a funeral activity or service. Petitioner
charges a fee for each occasion that a vehicle and driver are provided.
Historically, Petitioner has charged and collected both sales tax and the special
tax of 5% imposed upon the receipts from every short term (less than one year)
rental of a passenger car pursuant to Sections 1105(a) and 1160 of the Tax Law.
Applicable Law and Regulations
Section 1105(a) of the Tax Law imposes sales tax on the receipts from sales
(including rentals) of tangible personal property.
Section 1101(b)(5) of the Tax Law defines the terms “sale, selling or
purchase, ” in part, to mean:
Any transfer of title or possession or both, exchange or
barter, rental, lease or license to use or consume . . .
for a
consideration, or any agreement therefore, including the rendering
of any service, taxable under this article, for a consideration or
any agreement therefor.
Section 1160 of the Tax Law provides, in part:
(a)(1) On and after June first, nineteen hundred ninety, in addition
to any tax imposed under any other article of this chapter, there is
hereby imposed and there shall be paid a tax of five percent upon
the receipts from every rental of a passenger car which is a retail
sale of such passenger car.
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TSB-A-97(65)S
Sales Tax

(b) For purposes of this section, the following definitions shall
apply:
(1)
Motor vehicle.
A motor vehicle as defined in section one
hundred twenty-five of the vehicle and traffic law, but not
including a motorcycle.
(2) Passenger car. A motor vehicle having a gross vehicle weight
of nine thousand pounds or less with a seating capacity of nine
persons or less designed for passenger transportation.
(3) Rental. The transfer of possession of a motor vehicle, whether
or not the motor vehicle is required to be or is registered by this
state, for a consideration, without the transfer of the ownership of
such motor vehicle, but not including a lease described in
subdivision (i) of section eleven hundred eleven of this chapter.
Section 1165 of the Tax Law provides, in part:
The tax imposed by section eleven hundred sixty of this
article shall be administered and collected in a like manner as and
jointly with the taxes imposed by sections eleven hundred five and
eleven hundred ten of article twenty-eight of this chapter. . . .
Sections 526.7(e)(4) and (6) of the Sales and Use Tax Regulations provide,
in part:
(4) “Transfer of possession” with respect to a rental, lease
or license to use, means that one of the following attributes of
property ownership has been transferred:
*
*
*
(iii) the right to use, or control or direct the use of,
tangible personal property.
*

*

*

(6) When a lease of equipment includes the services of an
operator, possession is deemed to be transferred where the lessee
has the right to direct and control the use of the equipment. The
operator’s wages, when separately stated, are excludible from the
receipt of the lease, provided they reflect prevailing wage rates.
Section 541.9(c)(2)(vi) of the Regulations provides:
(vi) The total amount of the lease or rental charge is subject to
tax. However, if nontaxable items such as insurance (including
collision damage waivers) and driver’s wages (if reasonable in
relation to prevailing wage rates) are sold outright to the lessee
in conjunction with the lease or rental, the charges for such items
are not subject to tax if they are separately stated.

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TSB-A-97(65)S
Sales Tax

Opinion
Petitioner contracts with area funeral directors to furnish automobiles and
drivers to them for their use in conducting funerals. Such an agreement entered
into between a funeral director and an auto rental establishment is a rental of
tangible personal property, provided the funeral procession is under the
direction and control of the funeral director and a transfer of possession of
such vehicles takes place (see Section 1101(b)(5) of the Tax Law and Sections
526.7(e)(4) and (6) of the Sales and Use Tax Regulations.) For example, the
funeral director will be deemed to have direction and control of the funeral
procession where he sets the itinerary for the funeral and determines the route
to be taken by the drivers (see Limousine Operators of Western New York, Inc.,
Adv Op Comm T&F, October 27, 1988, TSB-A-88(55)S).
The receipts from such
rentals would be subject to State and local sales and use taxes under Sections
1105 and 1110 and Article 29 of the Tax Law since they constitute sales of
tangible personal property (see Buckley Funeral Homes v City of New York, 199
Misc 195, aff’d 277 AD 1096); Limousine Operators of Western New York, Inc.,
supra).
Section 1160 of the Tax Law imposes an additional special tax on short term
passenger car rentals (less than one year) at the rate of 5% of the rental
receipts. The automobiles rented by Petitioner to the funeral directors are
motor vehicles as defined in Section 1160(b)(1) of the Tax Law. The transfer of
automobiles for a consideration constitutes a rental as defined in Section
1160(b)(3) of the Tax Law (see BEJ Taxi Corp., Adv Op Comm T&F, February 13,
1991, TSB-A-91(20)S). Therefore, the 5% special tax on passenger car rentals
will be applicable to the receipts received by Petitioner provided the
automobiles constitute passenger cars as defined in Section 1160(b)(2) of the Tax
Law (i.e., have a gross vehicle weight of nine thousand pounds or less with a
seating capacity of nine persons or less designed for passenger transportation).
Since a hearse is not designed for passenger transportation, the rental of a
hearse is not subject to the special 5% tax.
Therefore, Petitioner is correct in collecting the State and local sales
and use taxes on each payment from the funeral director for any vehicle rented.
Petitioner is also correct in collecting the additional 5% special short-term
rental tax on passenger cars designed for passenger transportation.

DATED: November 4, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.